Fringe-of-grid & network-constrained areas

ARENA’s investment focus is on supporting knowledge sharing and demonstration activities that are focused on:

demonstrating the viability of distributed renewable energy systems (potentially in conjunction with enabling technology such as storage) to alleviate the need for network augmentation in areas that are typically fringe-of-grid or where there is a network constraint

demonstrating the ability of distributed renewable energy systems to provide other benefits at the fringes of grids, such as to reduce losses or increase reliability.

Rationale

ARENA’s analysis of fringe-of-grid and network-constrained areas is based on analysis undertaken by the agency to establish the Regional Australia’s Renewables (RAR) Initiative.

Likely scale and potential for growth by 2030-40

Electricity is generally more expensive to deliver at the fringes of grids due to higher capital costs per unit of delivered energy, increased susceptibility to outages and higher transmission losses.

Distributed renewable generation has the potential to improve energy supply in such areas because the systems can be deployed close to the point of demand. This could reduce the need for network augmentation, particularly if the renewable installations can demonstrate high reliability. Renewable energy installations are generally scalable and can therefore be tailored to meet growing demand profiles and have the potential to lower electricity costs.

Network constraints arise in areas where power demand cannot be met by existing supply. Although the locations are not necessarily on the fringes of grids, distributed generation again has the potential to support the network and presents an opportunity for increased deployment of renewable energy.

Renewable penetration levels are currently low in fringe-of-grid and network-constrained areas. However there is potential for increased deployment, particularly if demand from industrial and residential consumers increases. For example, there is currently 600 MW of installed capacity in the North West Interconnected System (NWIS) with only 1 MW of renewable energy generation (utility-scale PV). While the total market size is likely to be lower than utility-scale energy delivery in 2040, the higher potential value means renewables could be cost-competitive sooner. In network-constrained areas, a 2012 report identified up to $800 million of potentially avoidable network augmentation in areas with good solar resources.[1]

Investment influence

Network service providers have several options to address supply issues in network-constrained or fringe-of-grid areas, including network augmentation, demand management and distributed generation.

With distributed generation, the options range from renewable energy to more traditional fossil fuel (diesel or gas) based generation. Through funding support and knowledge sharing ARENA could demonstrate to network service providers that renewables-based distributed generation is a viable way to address energy supply issues in these areas.

Renewable energy has not been adopted to address fringe-of-grid and network-constraint issues due to concerns about reliability and network security. Technology costs and the regulatory environment have also been barriers. By supporting early movers and sharing the knowledge generated by projects, ARENA can help address the reliability and operational risks, and also inform relevant regulatory and investment decision-making. ARENA activities can also demonstrate the application of renewable energy in different grid configurations.

Such improved understanding is applicable not only to create opportunities for renewables in fringe-of-grid and network-constrained areas, but also for integrating renewables and grids more generally.

Gap in ARENA portfolio

As at June 2015 ARENA had invested in a small number of projects that are deploying solar PV in fringe-of-grid areas.

In the same period ARENA had no projects involving network constraints, but had supported the development of a protocol for ascertaining and publishing data (using an online mapping platform) relating to grid constraints. This project will allow for the identification of network constraints and hence where opportunities may exist for the application of distributed generation.

There is also further scope for ARENA to support activities that share knowledge between project proponents and network companies.

Conclusion

Given the small number of projects in ARENA’s investment portfolio that address this priority, ARENA is interested in supporting projects that develop or demonstrate the ability of renewable energy technologies (potentially including enabling technology such as storage, load control and control systems) to improve energy supply outcomes in fringe-of-grid and network-constrained areas.

Such projects will require the support and active engagement of network service providers. ARENA has taken steps to engage these organisations through the RAR Initiative and in identifying integrating renewables and grids as an investment priority area.